Getting a credit card and using it responsibly is a good way to start building your credit history. However, it’s a Catch-22 situation where getting a credit card with no credit history is hard but getting a credit history without some form of credit, including credit cards, is nearly impossible.
Recognizing this problem, banks and other financial institutions have started offering credit cards to those with little or no credit history. Here are some tips on getting a credit card with no credit history.
Once you reach the age of 18, you’ll be able to apply for your own credit card. Many banks offer credit cards to students with no credit history. While these cards may have low credit limits, the important thing is to start charging purchases to these cards and consistently pay them off on time to build the foundations of a good credit history.
Creditcards.com’s top choice for student credit cards is the Capital One Student Rewards card, which has no annual fee but offers a generous 2% cash back on restaurants, entertainment, cell phone bills, and books. You will also receive 1% cash back on all other purchases.
Get a secured or prepaid credit card
Credit card issuers are understandably wary of issuing an unsecured line of credit to those with little or no credit history. However, you can still qualify for a credit card by securing your credit line. This means that you put down a deposit for the credit card and you can charge against that deposit. Essentially, you are prepaying for your credit card. In most cases, your credit line will equal your deposit amount.
Credit unions are a good place to look for these secured or prepaid credit cards. Ideally, they should have no application fee and no or low annual fees. Look for a card that helps you to build your credit history by automatically reporting your payment history to credit bureaus. You should also be able to gradually convert the card into a regular unsecured credit card after a certain period of time.
A good example is the Capital One Secured MasterCard. This card features free credit reporting to all three major credit bureaus, and allows you to increase your credit line based on your payment and credit history. It also comes with free tools to help you to track your credit.
Get a supplementary credit card
Piggybacking on your parents’ or your spouse’s credit card account is another way to get a credit card. However, by becoming a joint account holder, their credit history automatically becomes yours, so make sure you choose the person wisely.